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Brussels Airlines deal stumbles over penalty system

© Brussels Airlines

Discussions between the Belgian government and Lufthansa, the parent company of Brussels Airlines, appear to be blocked over a penalty clause in the agreement, De Tijd reports.

Three months ago, almost before the national lockdown caused by the coronavirus, Brussels Airlines came to the federal government with a request for state aid of €290 million.

Now, three months later, Brussels Airlines is still waiting for a response from the caretaker government of prime minister Sophie Wilmès, which is still preoccupied with the coronavirus epidemic.

Talks with Brussels Airlines and parent company Lufthansa Group have been ongoing all the same, even though the Wilmès government’s thoughts have been elsewhere.

Belgium obtained a sort of guarantee from Lufthansa that any Belgian aid would be hypothecated to Brussels Airlines and not used for group purposes. Lufthansa’s agreement on a much larger package of aid from the German government seemed to make that problem disappear.

Now the problem seems to revolve around a clause written into the government’s agreement on aid to Brussels Airlines. Unless Lufthansa meets the conditions of the agreement, a penalty will apply.

That consists in a choice: if Lufthansa as parent of Brussels Airlines fails to meet the conditions laid down for the aid, either it pays a fine, or the state aid transforms into a shareholding.

That last is something Lufthansa has strenuously avoided, where Belgium is concerned as well as Germany. Closer to home, CD&V has also opposed any participation by the Belgian state in the capital of Brussels Airlines.

Belgium’s misgivings go back to 2016, when Lufthansa took over Brussels Airlines in the first place. Then, Lufthansa made certain promises on the future of Brussels Airlines, which in the end were not met.

Hence the reason why the penalty clause was written into the new state aid agreement.

And even as the problem remains unresolved, Brussels Airlines in due to restart with a partial programme of flights from Monday.

Alan Hope
The Brussels Times